Prediction of financial distress in the Spanish banking system: An application using artificial neural networks

Jessica Paule-Vianez ^[1] ; Milagros Gutiérrez-Fernández ^[2] ; José Luis Coca-Pérez ^[2]
1. [1] Universidad Rey Juan Carlos
  
  Universidad Rey Juan Carlos
  
  Madrid, España
2. [2] Universidad de Extremadura
  
  Universidad de Extremadura
  
  Badajoz, España
Localización: Applied economic analysis, ISSN 2632-7627, Vol. 28, Nº. 82, 2020, págs. 69-87
Idioma: inglés
Enlaces
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Resumen
- Purpose – The purpose of this study is to construct the first short-term financial distress prediction model for the Spanish banking sector.
  
  Design/methodology/approach – The concept of financial distress covers a range of different types of financial problems, in addition to bankruptcy, which is not common in the sector. The methodology used to predict financial problems was artificial neural networks using traditional financial variables according to the capital, assets, management, earnings, liquidity and sensibility system, as well as a series of macroeconomic variables, the impact of which has been proven in a number of studies.
  
  Findings – The results obtained show that artificial neural networks are a highly suitable method for studying financial distress in Spanish credit institutions and for predicting all cases in which an entity has short-term financial problems.
  
  Originality/value – This is the first work that tries to build a model of artificial neural networks to predict the financial distress in the Spanish banking system, grouping under the concept of financial distress, apart from bankruptcy, other financial problems that affect the viability of these entities.